BENECARD SERVICES, INC. v. ALLIED WORLD SPECIALTY INSURANCE COMPANY et al

Filing 100

MEMORANDUM OPINION. Signed by Magistrate Judge Tonianne J. Bongiovanni on 4/17/2017. (seb)

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
BENECARD SERVICES, INC.,

Civil Action No. 15-8593 (MAS)

Plaintiff,
v.

MEMORANDUM OPINION

ALLIED WORLD SPECIALTY
INSURANCE COMPANY et al,
Defendants.
BONGIOVANNI, Magistrate Judge
This matter comes before the Court upon Plaintiff Benecard Services, Inc.’s (“Plaintiff”)
motion for a protective order (1) striking the subpoena’s document request demanding irrelevant
and privileged material; and (2) allowing Plaintiff to conduct a pre-production privilege review
of Wells Fargo’s remaining responsive documents. (Docket Entry No. 85). Defendants Allied
World Specialty Insurance Company (“Allied”) and Atlantic Specialty Insurance Company
(“Atlantic”) oppose Plaintiff’s motion. (Docket Entry Nos. 90 and 91). The Court has fully
reviewed and considered all arguments made in support of and in opposition to Plaintiff’s
motion. The Court considers same without oral argument pursuant to L.Civ.R. 78.1(b). For the
reasons set forth more fully below, Plaintiff’s motion is DENIED.
I.

Background and Procedural History
Plaintiff filed its complaint against Defendants Allied World Specialty Insurance

Company, Atlantic Specialty Insurance Company and RSUI Indemnity Company on December
14, 2015 and amended its complaint to add Defendants Travelers Property Casualty Company of
America (“Travelers”) and Ace Property and Casualty Insurance Company (“Ace”) on
September 28, 2016. Plaintiff seeks “(i) a declaratory judgment that [Defendants] must provide

coverage for defense and indemnity costs arising from the now-settled lawsuit against Plaintiff,
Smart Insurance Company v. Benecard Services, Inc., Civil Action No. 1:15-CV-04384, filed in
the United States District Court for the Southern District of New York (“Smart Action”); (ii)
compensatory and consequential damages arising from Allied’s, Travelers’ and Atlantic
Specialty’s breaches of their insurance policies; and (iii) consequential damages arising from
Allied’s, ACE’s and Atlantic Specialty’s bad faith conduct toward plaintiff.” (Pl.’s Br. in Supp.
of Mot. at 1-2).
The instant motion involves a subpoena duces tecum (“subpoena”) served by Allied on
non-party Wells Fargo Insurance Services USA, Inc. (“Wells Fargo”) on August 19, 2016.
Wells Fargo facilitated Allied’s sale of its D&O insurance policy to Plaintiff.
Allied’s subpoena demands the following documents from Wells Fargo:
1. Wells Fargo’s complete file related to the application for, negotiation of and
procurement of any errors and omissions, directors and officers/management liability
and general liability insurance policies on behalf of Plaintiff since 2010 (“Request
1”).
2. Any documents related to, referring to, or concerning any of the policies and any
predecessor or renewal policies purchased by Plaintiff since 2010 (“Request 2”).
3. Any documents in Wells Fargo’s possession regarding the Smart Action and/or
Plaintiff’s pursuit of insurance coverage for the Smart Action (“Request 3”).
4. Any and all communications between Wells Fargo and Plaintiff regarding insurance
since 2010 (“Request 4”).
5. Any and all communications between Wells Fargo and Plaintiff or any of its insurers
regarding the Smart Action (“Request 5”).
6. Any and all communications between Wells Fargo and any individuals employed at
the law firms of McCarter & English, LLP or DLA Piper regarding the policies
and/or the Smart Action (“Request 6”).
7. Any and all documents in Wells Fargo’s possession regarding the scope of coverage
to be provided under the errors and omissions and directors and officers/management
liability policies (“Request 7”).
(See Pl.s Br. in Supp. of Mot. at 2-3)
Plaintiff argues that the subpoena seeks irrelevant and privileged information. (Id. a 4).
Plaintiff further argues that requests 1, 2, 4 and 7 “seek material neither relevant to the parties’
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claims or defenses nor reasonably calculated to lead to the discovery of admissible evidence” (Id.
at 5). Plaintiff states that these requests are overbroad in that they seek information that is not at
issue in this action, has no connection with Allied, has no connection with any other Defendant
in this action and has no connection with the Smart Action. (Id.).
Additionally, Plaintiff argues that requests 6 and 7 “seek access to information protected
by the attorney-client privilege and/or work product doctrine.” (Id. at 6). Plaintiff states that if
Wells Fargo acted as Plaintiff’s agent in purchasing its insurance policies, then the documents
and communications they exchange may potentially fall within the attorney client and work
product privileges. (Id. at 6 citing Cellco P’ship v. Certain Underwriters at Lloyd’s London, No.
05-cv-3158 (SRC), 2006 WL 1320067 (D.N.J. May 12, 2006)).
Plaintiff argues that in addition to striking document requests 1, 2, 4, 6, and 7, the Court
should allow Plaintiff to review Wells Fargo’s documents before their production to Allied to
prevent improper disclosure of privileged information. (Id. at 7). Plaintiff notes that “the Court
does not hesitate to require such pre-production review to protect the privilege.” (Pl.’s Br. in
Supp. of Mot. at 7 citing Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. Becton, Dickinson and
Company, No. 14-cv-4318 (CCC) (D.N.J. Sept. 2, 2016) and In re Kane v. Mfrs. Life Ins. Co.,
No. 08-cv-4581, 2010 WL 2178837 (D.N.J. May 26, 2010)).
Allied argues that Request 1, Request 2, and Request 7 are relevant because Allied has
paid substantial defense costs on Benecard’s behalf in the Smart Action and “there can be no
dispute that Allied…are entitled to discovery regarding any other potential sources of relevant
insurance for the Smart [Action].” (Allied’s Opp. Br. at 4). Allied further states that Request 1 is
“tailored to the three types of policies at issue here-D&O, E&O and GL-since 2010 and Request
2 is “limited to any of the “Policies,” which is defined as those involved in the lawsuit.” (Id. at

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4). Furthermore, Allied argues that Request 7 is relevant because Benecard “appears to
contemplate asserting arguments that certain provisions in the Insurer Defendant’s policies are
ambiguous, unenforceable and/or contrary to Benecard’s understanding.” (Id. at 6).
As for Request 4, Allied states that in response to Plaintiff’s claim of overbreadth, it
agrees to limit it to “Any and all communications between Wells Fargo and Benecard regarding
D&O, E&O and/or GL insurance since 2010.” (Id. at 5). Allied argues that information
“regarding the scope of D&O, E&O and/or GL coverage needed, the application process for such
insurance, the scope of insurance ultimately procured, and the terms of the policies is highly
relevant to [the] parties’ claims and defenses in this action.” (Id.)
Allied argues that Request 6, “Any and all communications between Wells Fargo and any
individuals employed at the law firms of McCarter & English, LLP or DLA Piper regarding the
Policies and/or the Smart [Action]” is relevant because “[c]learly, communications between
Wells Fargo and Benecard’s underlying defense counsel or coverage counsel relating to the
policies and/or the Smart [Action] are relevant under the broad umbrella of Rule 26.” (Id.)
Allied argues that Plaintiff cannot satisfy its burden to show that the responsive
documents are protected by the attorney client privilege and/or work product doctrine. (Id.)
Allied notes that Wells Fargo is not a party to this case and is not represented by DLA Piper or
McCarter & English, therefore, the attorney client privilege and/or work product doctrine does
not apply (Id.) Allied further notes that it has not asserted that Wells Fargo acted as Benecard’s
agent in purchasing its insurance policies. (Id.) Allied states that “Benecard utilized Wells
Fargo’s services as an insurance broker completely independent from (and prior to) any ongoing
or anticipated litigation. Communications to and from Wells Fargo made in the ordinary course
of business are not subject to any privilege.” (Id. at 8)

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In addition to joining in Allied’s arguments that the information requested is relevant,
Atlantic argues that Benecard lacks standing to ask the Court to strike the disputed requests.
(Atlantic’s Opp. Br. at 4). Atlantic notes that Wells Fargo did not object to any of the
subpoena’s requests and did not move to quash the subpoena. (Id.) Atlantic states that Benecard
has not claimed a privacy interest in the documents sought and “has failed to demonstrate the
existence of any privilege with respect to the documents sought.” (Id. at 5).
As for Benecard’s assertion that the information in Requests 6 and 7 is privileged,
Atlantic argues that Benecard “does not actually assert, let alone establish, that Wells Fargo was
or is its agent” and that “Benecard wants to be able to assert attorney-client privilege as to Wells
Fargo documents without actually binding itself to an agency relationship with Wells Fargo. (Id.
at 9).
II.

Analysis
Federal Rule of Civil Procedure 26(c) (“Rule 26(c)”) governs motions seeking the entry

of a protective order. Pursuant to Rule 26(c), “[a] party or person from whom discovery is
sought may move for a protective order in the court where the action is pending” and [t]he court
may, for good cause, issue an order to protect a party from annoyance, embarrassment,
oppression, or undue burden or expense[.]” For example, where good cause is shown, the court
may forbid the disclosure or discovery (Rule 26(c)(1)(A)) or forbid inquiry into certain matters
or limit the scope of disclosure or discovery to certain matters. (Rule 26(c)(1)(D)).
It is well established that the party seeking entry of a protective order bears the burden of
demonstrating that good cause exists for the order of protection. (Pansy v. Borough of
Stroudsburg, 22 F.3d 772, 786 (3d Cir. 1994)). “Good cause is established on a showing that
disclosure will work a clearly defined and serious injury to the party seeking closure.”

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(Publicker Indus., Inc. v. Cohen, 733 F.2d 1059, 1071 (3d Cir. 1984)). Further, the injury
claimed “must be shown with specificity.” (Id.; In re Cendant Corp., 260 F.3d 183, 194 (3d Cir.
2001) (finding that [i]n delineating the injury to be prevented, specificity is essential.”) “Broad
allegations of harm, unsubstantiated by specific examples or articulated reasoning,” are
insufficient to establish good cause. (Cipollone v. Ligget Group, Inc., 785 F.2d 1108, 1121 (3d
Cir. 1986), cert. denied, 484 U.S. 976, 108 S.Ct. 487, 98 L.Ed.2d 485 (1987)).
“In considering whether good cause exists for a protective order, the federal courts have
generally adopted a balancing process.” (Pansy, 23 F.3d at 787). Under this process, the court
“must balance the requesting party’s need for information against the injury that might result if
uncontrolled disclosure is compelled. When the risk of harm . . . outweighs the need for
discovery, disclosure [through discovery] cannot be compelled[.]” (Id.) (internal quotation
marks and citation omitted). Nondisclosure in total is an “infrequent result.” (Id.) (internal
quotation marks and citation omitted)). Instead, the issue usually becomes whether disclosure
should be made in a specified way. In determining whether good cause exists to limit disclosure,
as permitted by Rule 26(c)(1)(D) and other provisions of Rule 26(c)(1), the court again balances
the harm to the party or third persons seeking protection against the importance of disclosure to
the public or the party seeking same. (Id). The Court always has discretion to issue a protective
order limiting discovery under Rule 26(c) when there is good cause to do so.
Here, the Court finds that good cause does not exist to enter the protective order.
Plaintiff’s arguments in support of the protective order all relate to relevancy and privilege. The
Court finds that as the allegations in the underlying matter relate to insurance coverage for a
now-settled lawsuit, the information requested by Allied is relevant. Additionally, the Court

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finds that the requests are not overbroad. Both sides concede that Plaintiff first dealt with Smart
in 2012. It is reasonable that communications regarding the Policies could have started in 2010.
The Court further finds that Plaintiff has not demonstrated that the information requested
in Request 6 and Request 7 is protected by the attorney client privilege or the work product
doctrine. The Court notes that while Plaintiff argues that that if Wells Fargo acted as Plaintiff’s
agent in purchasing its insurance policies, then the documents and communications they
exchange may potentially fall within the attorney client and work product privileges, Plaintiff has
not actually stated that Wells Fargo acted as Plaintiff’s agent or offered any evidence that Wells
Fargo acted as Plaintiff’s agent. The Court further notes that any communications between
Wells Fargo and DLA Piper or McCarter & English are not protected by the attorney-client
privilege as Wells Fargo is not represented by either firm. Plaintiff has not met the burden of
showing that good cause exists to issue a protective order.
The Court finds that a pre-production privilege review of Wells Fargo’s responsive
documents is not necessary. The cases cited by Plaintiff in support of its argument that “the
Court does not hesitate to require such pre-production review to protect the privilege” are
distinguishable.

In Kane, Plaintiff Thomas F. Kane objected to a subpoena issued by Defendant

The Manufacturers Life Insurance Company against non-party Thomas F. Kane, Jr. claiming that
the documents requested were protected by the attorney-client privilege and/or work product
doctrine. (In re Kane v. Mfrs. Life Ins. at 1). The Court stated “this Court is persuaded by
Adare’s1 assertion that certain documents may be protected under either the attorney-client
privilege and/or work product doctrine. Therefore, Adare shall be provided with an opportunity
to review the relevant documents and meet and confer with [Defendant] Manulife in a good faith

1

Thomas F. Kane, Jr. is a limited partner of Adare (In re Kane v. Mfrs. Life Ins. Co., No. 08-cv-4581, 2010 WL
2178837 at 2 (D.N.J. May 26, 2010)).

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attempt to resolve any disputes and/or objections.” (Id.). This Court notes that although the Court
in Kane did not recognize Plaintiff’s assertion of privilege2, it was willing to let non-party Adare
determine whether it had a protectable privilege regarding subpoenaed documents and, therefore,
permitted the attorney for Adare to review for privilege before producing the documents. This
Court further notes that Adare submitted a brief to prevent the disclosure of Adare’s privileged
information and/or confidential information. (Id. at 2). In this case, non-party Wells Fargo has
not objected to Allied’s subpoena.
In Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. Becton, Dickinson and Company,
Defendant Becton Dickinson initially anticipated moving for a protective order striking
document requests and allowing Becton Dickinson to review the requested documents for
privilege prior to their production. The parties subsequently agreed to the pre-production review
and withdrew the request for pre-production review as moot, therefore, the Court never rendered
an opinion regarding the appropriateness of the pre-production review. (Nat’l Union Fire Ins.
Co. of Pittsburgh, PA v. Becton, Dickinson and Company, No. 14-cv-4318, Docket Entry No. 92
(CCC) (D.N.J. Sept. 2, 2016)).
Conclusion
For the reasons stated above, Plaintiff’s motion for a protective order is DENIED3.
Plaintiff’s request to conduct a pre-production privilege review of Wells Fargo’s remaining

2

“Here, this Court finds that Plaintiff failed to demonstrate that communications made between Kane Jr. and
Plaintiff’s counsel are protected by the attorney-client privilege.” (In re Kane v. Mfrs. Life Ins. at 6).
3
The Court does, however, modify Request 7 to state “Any and all documents in Wells Fargo’s possession
regarding the scope of coverage to be provided under the errors and omissions and directors and
officers/management liability policies since 2010.”

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responsive documents is DENIED. An appropriate Order follows.

Dated: April 17, 2017
s/ Tonianne J. Bongiovanni
TONIANNE J. BONGIOVANNI
United States Magistrate Judge

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